For risk #1:

a. Was the engagement teams assessment of the evaluation of the design of each control appropriate (i.e., does the control identified by the team address the specific risk of material misstatement and associated assertion)

b. Was the engagement teams assessment of the risk associated with each control appropriate?

c. Was the teams interim planned procedures to test the operating effectiveness of each control appropriate considering the risk associated with the control?

d. Was the teams roll-forward planned procedures to test the operating effectiveness of each control appropriate considering the risk associated with the control

+ D Page view A Read aloud Add text | Draw V Highlig Account Balance and Disclosure: Revenue Class of Transaction: Recording Sales Identification of risk of material misstatement Relevant assertion Significant risk? Risk #1 All orders shipped are not recorded as revenue. Completeness. No. No. Risk of material misstatement because of fraud? Control activity that addresses the risk of material misstatement Control #1: Sales are automatically recorded, and invoices are automatically generated upon releasing the order in the Warehouse SELLANDSHIP System. Orders are not released until the goods have been confirmed for shipping in the system (which occurs when the goods are scanned as they are loaded in the shipping area). No. Does the control rely on information used in the control (or IUC)? If yes, list relevant information N/A Will we obtain audit evidence of the accuracy and completeness of the information used in the control by testing controls? Is the control automated? Yes. Relevant application system (if we are testing Warehouse SELLANDSHIP System, which is subject to IT controls performed by management and tested within the information used in the control through tests of IT controls workpaper. controls or the control is automated) Tests of controls: evaluation of design Based on the following factors, we concluded that the control is appropriately designed to address the stated risk of material misstatement: 1. The control is the automation of the invoicing of goods shipped as the system will automatically record revenues when goods are shipped from the warehouse (revenue-generating activity). Thus, resulting in no shipped goods going unrecorded in the system that appropriately addresses the related risk of material misstatement and assertion. 2. Automated control prevents errors from occurring instead of identifying them once they have occurred (preventive control). 3. The control operates at the transaction level and, as such, is sufficiently precise to mitigate the risk. 4. The control is performed continually and thus addresses the risk directly and for the period under audit. 5. There are no historical issues with the control operation, and the control has not been modified in the period under audit. Risk Associated with the Control Not Higher Interim Procedures (test as of 9/30): 1. We will verify the understanding by testing general IT controls to assess if there have been any changes to the control since the previous year. 2. In addition, we will perform standard sample testing of any program changes to the control to ensure the control is operating effectively. Tests of controls: planned operating effectiveness testing Roll forward Procedures: 1. Make inquiries of the controller and the IT manager to determine if any events have occurred that might impact the design or operation of the control (e.g., changes, additional risks, operating deficiencies) after our interim testing date. If any significant changes are noted retest control